Nutanix Rising: This is How we Avoid Cloud Lock-in, Says CEO Pandey

Shares of “hyper-converged” technology pioneer Nutanix (NTNX) are up 88 cents, or 2.4%, at $37.08, after the company this afternoon reportedfiscal Q2 revenue and earnings per share that topped analysts’ expectations, and forecast this quarter’s results higher as well.

Separately, the company said it would acquire Santa Clara, California-based software startup Minjar, which makes programs that let companies manage work running in public cloud computing facilities. Terms were not disclosed.

Following the company’s conference call this afternoon with analysts, CEO, chairman and founder Dheeraj Pandey was kind enough to talk with me by phone, reflecting on the company’s move to being a software outfit, and how Nutanix’s “operating system” can ultimately help companies avoid the “lock-in” of being bound to one particular cloud computing service.

Nutanix’s revenue in the three months ended in January rose 44%, year over year, to $286.7 million, yielding a net loss per share of 14 cents. That was above consensus for $283 million and a 20-cent loss per share.

The company’s gross profit margin was up just slightly from a year earlier, at 63.5% versus 63.2%, on a non-GAAP basis.

The company said its “billings” in the quarter rose 57%, year over year, to $355.9 million.

For the current quarter, the company forecast revenue of $275 million to $280 million, and a net loss of 19 cents to 21 cents. That compares to the average estimate for $267 million and 23 cents.

During our interview by phone, I asked Pandey what investors should focus on.

“The biggest thing,” he said, “is that in this software-defined journey, we have been able to balance customer experience with our own transformation experience."

He was referring to the fact that the company is slowly moving to being a software-only outfit. Nutanix is decreasing the hardware component of its revenue over time, although it will continue to sell offer hardware to customers who want it.

“We’ve done a pretty good job right out of the gate with our software transformation," he continued. At the rate that the company is going, he told me, "we could be a bellwether” for the software industry.

I remarked that having crossed over a billion dollars in annual revenue, the company is at an impressive level. “And yet it’s still very small,” he replied. “We are just scratching the surface of this very large market."

The move to software only — the operating system of enterprise operations, as he terms it — is "the next layer of abstraction” in computing, said Pandey.

And, he added, "mobility is the killer app,” in the sense of being able to move the company’s code across whatever hardware and cloud platforms customers want to use.

“We are really making our software ubiquitous — we can be a platform company,” he said of the result of the change.

Platform companies have two or three things they do right. They are highly ubiquitous, spanning different kinds of hardware. And they have amazing APIs. They fit together all the pieces of the puzzle using those APIs. And the third thing is, it's very easy to use. We can think of the entire operating system in that sense. You look in some clouds, we won’t have the entire stack, and yet there are other clouds that are actually doing bare model. So there’s a big opportunity to have a leveraged model.

In a sense, where it might be headed, said Pandey, is for the company’s software to be like an Uber of cloud computing, where no assets are owned in the data centers themselves, but capacity for compute spans clouds:

Think about it: Uber, or Airbnb, don’t own hardware. They are really good orchestrators. There is something to be said for that, what does it mean for computing to be a cloud operating system that doesn't need to own data centers. I am saying we have a small chance. It’s a five- to ten-year journey.

Pandey said customers want such a reality precisely because they do not want to be “locked in” to any one cloud provider.

By way of analogy, "that’s what Java did” in an age of Microsoft (MSFT) Windows dominance of compute, he said. “We need to do this in a portable way. It’s the same thing with open source. We want to avoid lock-ins. We don’t want to be locked into the proprietary systems."

Going a little further along that line of thought, I asked Pandey if he thinks it’s possible cloud computing will evolve to a point where a single thread of instruction will span multiple cloud computing facilities, for example, starting up in Amazon’s (AMZN) AWS, transiting through Microsoft’s Azure, and finally terminating on Alphabet’s (GOOGL) Google’s cloud facilities.

“If latency is not a requirement, yes,” he replied, “if you are not shuttling large amounts of data. One thing is, Where is the data generated? If it’s in one cloud, you want to have logic right there, locality is key, because latency is the real enemy."

Then he added, "you could send small amounts of data, and then mash that up with another data set. We’re thinking about applications already where our operations center is sitting in our own cloud, and we have a lot of telemetry coming from customer machines, and that telemetry data is then put in this big data pipeline. Perhaps instructions in one cloud produce some intermediate results, and those are sent another cloud."

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Nutanix Rising: This is How we Avoid Cloud Lock-in, Says CEO Pandey

Shares of “hyper-converged” technology pioneer Nutanix (NTNX) are up 88 cents, or 2.

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